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Weekly Roundup: Signs of Fed dovishness weigh on US dollar demand

currency-newsWeekly Roundup: Signs of Fed dovishness weigh on US dollar demand
Fed Chair Jerome Powell prompted the US dollar to trend lower across the board last week as he sounded a note of caution over the economic outlook.

As Powell acknowledged that the fallout of the Covid-19 outbreak is a risk to the US outlook he appeared to open the door towards a potential interest rate cut in the months ahead.

This saw the US dollar slump against its rivals, with markets wary of the potential for the Fed to return to a loosening bias.

A solid uptick in January’s consumer price index failed to offer USD exchange rates any real rallying point, given that the measure is not the Fed’s preferred gauge of inflationary pressure.

The release of the latest set of Federal Open Market Committee (FOMC) meeting minutes could see the US dollar slide further this week.

As long as investors see reason to bet on the possibility of the Fed cutting interest rates against before the end of the year any support for the US dollar could prove limited.

However, if January’s leading index rebounds as forecast this may help to put a floor under USD exchange rates as hopes of a stronger first quarter economic performance improve.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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